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Education

The Hutch Report

Learning from Google’s Mistakes

By | Education, Psychology

Everybody uses Google’s search engine daily, however, in addition to using their tools people should be learning from what Google does as a company, especially when it comes to failure.

When kids are learning to speak, walk, or do most of the actions we take for granted as adults, they are never impeded by the fact that they have previously failed their attempts. They just keep modifying their actions until they succeed.  So why and when does this change?  At what age do we suddenly have the realization that if we don’t do things perfect, we are less of a person?

You never hear a parent say to a baby as it is learning to walk, “You fell again, what’s the problem with you?” Unfortunately, at some moment this behaviour changes. You can see it on thousands of baseball little league fields, hockey rinks, basketball courts, singing contest, dancing contests, etc. A boy drops the ball and suddenly hears it from his coach, his teammates or some stranger in the stand yelling, “Bench that kid!” This instills the thought that we are not allowed to make a mistake.  That is a lot of pressure to put on anyone.

We don’t consider this kind of behaviour as the norm because we know that there is a large amount of support from parents and educators. There are a number of companies and researchers looking to improve and discover new approaches to learning and teaching. However, the desire to win at all cost does often override the desire to accept one’s mistakes, embrace them and learn from them.

The problem is not failure in itself; it is how people perceive failure. It is how we are conditioned to deal with failure.  Just the sound of the word seems to evoke the connotation of something less than whole, something weak or bad. Of course it doesn’t feel great to be performing in front of someone and make a mistake.  Somehow it makes us feel inferior or less than perfect. But therein lies the negative perception. Quite often that fear of failure works negatively on our nervous system, which in turn decreases our chances of performing at a peak level.

If one can change their perception of failure or their definition of what it means to fail then there is probably a greater chance that they improve more rapidly and their chance of success in whatever endeavour they choose. In addition, they enjoy the process.

The classic example of someone’s positive perception of failure is that of Thomas Edison. When asked how he dealt with so many failures in trying to find the right filament for the light bulb, he said, “I have not failed. I’ve just found 10,000 ways that won’t work.”

The Hutch Report

UNITED STATES – CIRCA 1911: Inventor and physicist Thomas Alva Edison (1847 – 1931) looking at a lightbulb (Photo by Nathan Lazarnick/George Eastman House/Getty Images)

Interestingly enough, the people who can embrace failure and take risks invent things; dare to do what others don’t because they are focused on the road to success in front of them. They don’t concern themselves with the failures they have left behind because in their minds it is just a part of the learning process. These failures don’t represent them.  Instead they are further clues on the road to getting to where they want.

Failure does not mean taking blind risks.  Failure is the result of taking a calculated risk.  It is that percentage of risk that results in a potential failure.  You analyze that result, make some changes and reduce your risk.  You do it again until your risk is eliminated and you succeed. The great Canadian Hockey player, Wayne Gretzky once said, “You miss 100% of the shots you never take”. If you take yourself out of the game, you will never have a chance at winning.

In business the word failure has become synonymous with Silicon Valley, mainly because of the startup and risk taking culture it has developed. However, this is looking at failure on a larger scale. It happens on a much smaller scale daily.  It could be screwing up a dinner, getting a crossword puzzle wrong.  Giving the wrong answer to a question at a dinner party (maybe even the same one where the dinner was screwed up). People are bothered by these failures because it seems to be a reminder that they are somehow not perfect.

Perfection is a figment of the imagination (see our post).  Believing that perfection exists means believing that once achieved you cease to grow or learn.  Our lives are a journey of constant discovery and improvement. To set yourself the illusive goal of perfection, you set yourself up for a string of never ending disappointments.

There have been many strong statements regarding failure made by well-known personalities over the years. They should be used as a great source of motivation towards changing our own perceptions on failure.

“The only real mistake is the one from which we learn nothing.” – Henry Ford

“Success is stumbling from failure to failure with no loss of enthusiasm.” – Winston Churchill

“Every adversity, every failure, every heartache carries with it the seed of an equal or greater benefit.” – Napoleon Hill

“You build on failure. You use it as a stepping-stone. Close the door on the past. You don’t try to forget the mistakes, but you don’t dwell on it. You don’t let it have any of your energy, or any of your time, or any of your space.” – Johnny Cash

“Failure is so important. We speak about success all the time. It is the ability to resist failure or use failure that often leads to greater success. I’ve met people who don’t want to try for fear of failing.” – J. K.  Rowling

“It’s fine to celebrate success but it is more important to heed the lessons of failure.”-Bill Gates

“Mistakes are the portals of discovery.”-James Joyce

The Hutch ReportSo what does all this have to do with Google? Google has to be considered an incredible success on so many levels however they have not achieved it by accident.  Google is one of the few companies that actually see making mistakes as a portal to learning and discovery. They have gone so far as to create a process, which they call a “Postmortem.” A postmortem is the process their team undertakes to reflect on what they learned from their most significant undesirable events. Incidents may happen, but not all require a postmortem. Therefore, the first important step is to 1. Identify the most important problems.

Once they have identified the problem their next step is 2. Work together to create a written record for what happened, why, its impact, how the issue was mitigated or resolved, and what to do to prevent the incident from recurring. They ask themselves questions such as; what went well, what didn’t go well, where did we get lucky, and what can we do differently next time?

Lastly, Google has understood that being blamed for an incident will only promote self-pity and become very unproductive. So they made a conscious decision to apply step 3. Promote growth, not blame. By removing blame from a postmortem, team members feel a greater psychological sense of safety. This enables them to escalate issues without fear. By assuring team members that they will not be punished for the mistakes they made, a greater trust is built. These three steps reposition failure as an opportunity for growth and development rather than as a setback.

These are steps that anybody can apply to their own daily lives. Learn from Google’s mistakes and look at every failure as a chance to discover something new, learn something, or improve something and you will in turn make yourself much happier.

The Hutch Report

Excess Credentialism

By | Education

We have all heard of price inflation, wage inflation or asset inflation, however over the past few years another kind of inflation has been creeping into the economy.  It is called degree inflation.

Many occupations that used to require a high school diploma are increasingly requiring a bachelor’s degree. This rise in educational requirements has now extended beyond just associate and bachelor’s degrees. Some employers that used to hire candidates with bachelor’s degrees, are now primarily hiring people who hold a Master’s degree.

You would think that a job which requires a degree such as an MBA would require the advanced skills that accompany it. You would also think that employers would be offering to pay more in order to attract better skilled qualified candidates. Therefore the logic follows that if you get a higher education you will be paid more and be better off.

 The problem is that although employers clearly see value in a college degree, the skills people learn in college are often not put to use on the job. According to a report by the New York Fed, roughly one in three college graduates (34%) are underemployed, meaning they work in jobs that do not require a college degree. This figure seems to have remained quite stable over the past quarter-century, with no real cyclical  from the trend. Among recent college graduates, the underemployment rate is even higher. Around 44% of college graduates ages 22 to 27 work in jobs that do not require a college degree. This figure appears to rise slightly post-recession and fall during economic booms, but over the long term it generally stays between 40% and 50%. So it may seem that the college-educated workforce that do not use their skills in the workplace has been the case for a long time.

There are, however, other signs in the economy that present a different story. The figures stated by the Fed seem to indicate a stable situtation yet according to recent figures also from the Fed, a different picture emerges. We can see this by looking at a general picture of the student loan debt landscape (Data via federalreserve.gov, WSJ, newyorkfed.org here, here and here and clevelandfed.org here). The most recent reports indicate there is:

  • $1.45 trillion in total U.S. student loan debt
  • 44.2 million Americans with student loan debt
  • Student loan delinquency rate of 11.2% (90+ days delinquent or in default)
  • Average monthly student loan payment (for borrower aged 20 to 30 years): $351
  • Median monthly student loan payment (for borrower aged 20 to 30 years): $203

About 40 percent of the $1.45 trillion student loan debt was used to finance graduate and professional degrees. Combined undergraduate and graduate average debt loads by degree are the following:

  • MBA = $42,000 (11% of graduate degrees)
  • Master of Education = $50,879 (16%)
  • Master of Science = $50,400 (18%)
  • Master of Arts = $58,539 (8%)
  • Law = $140,616 (4%)
  • Medicine and health sciences = $161,772 (5%)

These student loan debt statistics seem to show that the cost of attending college is becoming a growing burden for a huge portion of Americans. In addition, these numbers were taken from a study in 2012 according to the website Student Loan Hero. However, according to more recent data from the MIT Sloan School of Management, The average MBA debt last year (2016) hit a record $107,172 at Sloan, up 25% in four years from $86,688. Either graduates are not finding jobs or they are being forced to take jobs that pay salaries far below what they would expect to make in accordance with their degrees.

This situation is not being ignored by all observers. Four years ago, billionaire entrepreneur Peter Thiel announced the Thiel Fellowship. It is a two-year start-up accelerator for young science and technology prodigies. The program awards 20 kids under the age of 20 $100,000 each to pursue world-changing innovations and businesses. However, there is one catch. They have to drop out of school to get it.

Theil is not the only one to advocate dropping out of college. Blogger and entrepreneur James Altucher has also written many time about alternatives to college and all the reasons why you are better off not going.

Getting a higher degree used to be a challenge and also a filter in a way. Only those in society with the greatest dedication to study would surmount the entrance exams required to get into many schools and in addition, take on the heavy workload in order to finally achieve their degrees. The degree had a meaning and a special badge of honor which was highly praised and rewarded in the workplace.

Historically, most colleges and universities in the US have been non-profit. Although there have been for-profit institutions for many years most of them were not accreditated. Once this began to change, for-profit institutions began to grow rapidly. As the emphasis on profit took importance over education, the entry bar was lowered. Why would your institution want to turn away a paying customer? What seemed like the best strategy was to make it as simple as possible for a paying customer to enter and study. Having taught at a for-profit University I can tell you first hand that it was blatantly obvious where their focus and attention was.

The result of the proliferation of these for-profit institutions has been a flooding of the market with degrees from schools with absolutely no reputation for excellence in higher learning. Meanwhile, online learning and the growth of accredited university certificates through massive open online courses (MOOCs) on website like Coursera are now offering an alternative to traditional university enrolment.

So, what seems to have happened is we find ourselves in a vicious cycle. More and more employers are asking for more credentials. Therefore, in order to find a position more people are being forced back to school in order to satisfy the needs of the employers. With so many people obtaining degree qualifications there are increasing concerns that academic credentials are losing meaning and value.

The reduction of qualifications to status conferring pieces of paper is known as “Credentialism.” Credentialism is a concept that has been around since the 1970s, when it was coined by social scientist. It’s an ideology which puts formal educational credentials above other ways of understanding human potential and ability. With a greater degree toting underemployed population, students are therefore beginning to ask if their degrees are worth the tuition fees they are expected to pay back as long-term loans.

In the end, this cycle feeds on itself. The longer a graduate remains unemployed, the faster the value of his skill set is diminished in the market. What we are left with as a society is a large number of unemployed, underemployed highly skilled graduates with high debt load burdens that they are unable to pay off.

The answer to this problem may lie in our mindset. If our motivation for learning is the joy of discovery as opposed to monetary reward we may all find ourselves better off in the long run. Education has been widely documented by researchers as the single variable tied most directly to improved health and longevity. And when people are intensely engaged in doing and learning new things, their well-being and happiness can blossom.

The Hutch Report

Good Parents – And what should they tell their kids about money!

By | Education

Given the fact that the market is at all-time highs, valuations of companies are at all-time highs, and where we are in the classic boom-bust, rinse-repeat, business cycle; many people are wondering what to do with their investment money. For those already invested, perhaps with some gains over the years, is now a good time to pull out and put the money somewhere else? For those who have maybe just come into some money they are wondering if they should invest in the market, in real-estate, a business, or perhaps something else? Of course, these are perfectly normal questions and there is never any easy answer.

If you happen to have children and have ever sought parenting advice about how to handle certain situations, you might find this to be a similar exercise. I remember when my children were younger and my spouse and I had parenting questions we would seek the answers from various sources – essentially either asking grandparents, friends, reading books, online articles and forums, and of course each other. The thing was, we very rarely ever received similar advice. Investing is a bit like that, depending on who you ask you may get a different answer. Typically, people turn to their friends and in some cases a financial advisor. Your friends, each one of them has their own thing as well as their own appetite for risk and research and whatever it is they may be into – real-estate, stocks, gold-bugs, running a business, art or whatever it is they may be doing. Even financial advisors will give different views depending on their bias.

Another source of advice which most of us mere mortals do not have access to are the high end institutional and private wealth asset managers.  These are the folks managing the money for high and ultra-high net worth individuals. This is considered the smart money. It turns out that these folks have exactly the same questions about where and how to invest their money. And given the large sums involved, depending on how the smart money ends up answering these questions and wherever the smart money is placed can have significant impact across industries, sectors and markets across the globe.

This is why we have created The Hutch Report – Wealth Management Report and Insights from the Top 50 Wealth Management Institutions – which provides an aggregated view of where the smart money is looking and what options may exist for replicating smart money trades or alternatively, taking a contrarian view by understanding the consensus. As with anything, no one has all the answers. This edition of The Hutch Report is a great tool to help figure out how to answer the questions mentioned at the top of this post.